After a winter of record high LNG prices, the Asian markets are bracing again for another year of structural oversupply, as the strength of China and emerging Asian markets seems insufficient to bridge the gap between growing global supplies and declining consumption among legacy Asian buyers.

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Global supply capacity growth is expected to outpace demand growth in 2018, with 31.8 million mt/year of new capacity due to come online, versus a forecast global demand growth of 23.3 million mt year on year.

In late 2017, the spotlight was on Novatek's Yamal LNG in Russia, which loaded its first cargo December 8, and Dominion Energy's Cove Point LNG in Maryland, USA, which introduced feedgas into its facility early December and is due to begin commercial operations early 2018.

For 2018, more than 50% of the new incoming supply capacity will come from Australia, with 2018 startups largely expected towards the start and end of the year.

"All eyes are on the start-up dates and rate of ramp up from new facilities coming online in early 2018, being a key factor in balancing the summer season," S&P Global Platts Analytics senior LNG analyst Andre Lambine said.

On the demand side, global consumption is forecast to grow by 7.9% or 23.3 million mt year on year to 317.4 million mt. Growth in 2018 is forecast to come primarily from the Asia Pacific region, rising by 11% on the year to 231.2 million mt.

In Northeast Asia, the world's largest LNG demand center, combined imports from Japan, South Korea, China and Taiwan are expected to increase 4.6% year on year to 181 million mt in 2018. That growth is supported solely by China's demand growth, with the other three key importers to chart declining imports.

This is in contrast with import data from the full year of 2017, where imports from the region rose to 173 million mt, up 13.3% compared to the 153 million mt imported in 2016, according to Platts cFlow data.

Elsewhere in Asia, demand from India, Pakistan, Bangladesh, Singapore, Thailand, Malaysia and Indonesia will hit 50 million mt in 2018, up 41% from 35.4 million mt in 2017.

CHINA LEADING THE EXPANSION

China has superseded South Korea as the world's second largest LNG importing country in 2017 after Japan.

China's imports are expected to grow by 32.1% or by nearly 12 million mt year on year to reach nearly 49 million mt in 2018.

The impact of government policy promoting coal-to-gas switching is expected to be significant in 2018, Lambine said, with growth in gas utilization expected across all sectors.

China's total regasification capacity is also set to increase from the 70.7 million mt/year in 2017 to nearly 80 million mt/year in 2018, due to a combination of new terminals and expansions at existing terminals.

For the first quarter of 2018, the peak winter season for Northeast Asia, Platts Analytics identifies a 16 million cu m/d upside risk in demand, if imports across CNOOC and Sinopec terminals continue at current levels, and a further 6 million cu m/d upside should Sinopec's Tianjin terminal begin operations in January as opposed to current expectations of a March 2018 start-up.

LEGACY ASIA UNCERTAINTIES

In Japan, the world's largest LNG consumer, imports in 2018 are expected to decline 4.1% year on year to 78.9 million mt, as the country pushes to restart its nuclear reactor fleet.

The re-election of Japanese Prime Minister Shinzo Abe has boosted the prospects of Japan's nuclear restarts, but ongoing investigations into the Kobe Steel scandal have delayed restarts by Kansai Electric Power and Kyushu Electric Power.

Reactors No. 3 and No. 4 of Kansai Electric's Oi nuclear power plant in Fukui Prefecture were scheduled to restart in January and March. Both restarts are currently being pushed back by two months. Kyushu Electric's No. 3 and No. 4 reactors at its Genkai plant in Saga Prefecture have likewise been delayed until March and May, respectively.

In South Korea, LNG imports for 2018 are expected to decline by 1.1% year on year to 36.7 million mt, primarily due to stronger-than-expected imports in 2017, supported by nuclear outages in the first quarter and stock building following the start-up of three new storage tanks, each of 260,000 kiloliters capacity, at Samcheok.

Despite significant spare coal-fired power generation capacity in South Korea, eyes are on the planned shutdown of eight older coal-fired units from March to June 2018, totaling nearly 2.8 GW of capacity. Two more 250 MW coal units could also join the planned shutdown.

The shutdown of the eight coal units is expected to only have a minor impact, with S&P Global Platts Analytics forecasting a 5 million-12 million cu m/d uptick in LNG demand, or an additional two to four LNG cargoes a month, Lambine said.

In Taiwan, LNG imports for 2018 are expected to decline 1.6% on the year to 16.1 million mt due to incoming new coal-fired power generation capacity that is expected to displace gas-fired power generation.

However, state-owned power utility Taipower is facing government mandated curbs on coal burn at its power plants due to pollution problems. While the curbs have not been finalized, Taiwan's demand could face an upside risk of 10 million cu m/d from January to May if the curbs are put in place.

Taiwan's imports for 2017 have totaled nearly 16.3 million mt, having grown 11% compared to 2016.

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